Domestic small and medium-sized construction companies are going bankrupt one after another, causing difficulties in the paint industry.
The sales and operating profits of Korea's leading paint corporations KCC, Noroo Paint & Coatings, and Samhwa Paint decreased compared to the same period last year.
In particular, the sales of Chokwang Paint fell by about 20% to 102.8 billion won. Operating profits also turned to a deficit for the first time in two years. The subsidiary 'Chokwang Jotun,' which sells marine paint, performed well, but it was insufficient to boost overall results.
The owner's third generation is trying to diversify the business into electric and electronic materials by establishing CK EM Solutions, but this is not easy either.
◇Fourth largest paint corporation in Korea…expanding business into electric and electronic materials
Chokwang Paint is the fourth largest paint corporation in Korea. Established in January 1976, it produces and sells industrial, woodworking, powder coating, and architectural paints. As of 2024, the corporation generates 23% of its revenue from industrial paints, 15% from powder coatings, and 13.7% from architectural paints. It was listed on the securities market on December 27, 1976.
The consolidated subsidiaries include Chokwang Paint's Viet Nam branch and the heat-resistant material development company CK EM Solutions. Of the Viet Nam branch's revenue, 44% comes from woodworking paints, followed by industrial and architectural paints. CK EM Solutions is a subsidiary established by Chokwang Paint in 2021 to expand its operations into high-value-added non-coating sectors in the electric and electronic component materials field.
Affiliated companies include Chokwang Jotun, Reform, and Smecco. Chokwang Jotun was established with a 50% investment from Chokwang Paint and Norway's Yoton, selling paints used on ships and marine structures to major domestic shipyards. Chokwang Paint holds 50%, 18.8%, and 13.76% equity in the three companies, respectively. The revenue from the three companies is reflected in other revenue according to their equity ratios.
◇Yang Seong-a becomes CEO in 2018…mother and daughter management with Song Gyeong-ja
Chokwang Paint is currently led by its third generation owner, CEO Yang Seong-a, and her mother, chairwoman Song Gyeong-ja. Following the death of Yang Seong-min, the second-generation leader and the late Yang Bok-yun's eldest son, in 2015, the company transitioned to a mother-daughter management system.
After graduating from Rutgers University in New Jersey, CEO Yang earned a Master of Business Administration (MBA) from the University of California. She joined Chokwang Paint in 2003, progressing from head of the sales division to vice president before becoming CEO in 2018. Yang also serves as an internal director of CK EM Solutions, a non-executive director of Chokwang Jotun, and the CEO of Reform.
CEO Yang has a disproportionately high equity stake in the company. This is because her father, Yang Seong-min, passed away, transferring 12.22% of his equity to Yang. As of the end of 2024, CEO Yang's equity stake is 18.62%, chairwoman Song holds 4.65%, her elder sister Yang Eun-a has 5.81%, and Yang Kyung-a has 5.73%. However, it is known that the two sisters do not participate in management. Combined, the equity stakes of the related parties amount to 37.78%.
◇Chokwang Paint's core competitiveness is weakening…affiliated company Chokwang Jotun is soaring
Chokwang Paint's poor performance is a challenge. Coincidentally, Chokwang Paint has been posting deficits since CEO Yang took office. In 2023, the company successfully turned profitable alongside the expansion of the interior market post-COVID-19, but this year, the construction industry slowdown has contracted domestic sales, and the tariff conflicts between the U.S. and China combined with China's domestic production promotion policies have reduced export volumes, resulting in a return to deficits.
Chokwang Paint recorded slightly decreased sales of 248 billion won and an operating profit of 2.4 billion won in 2024, turning to a deficit with sales of 102.7 billion won and an operating loss of 7.7 billion won in the first half of this year.
It has been a long time since the performance of the affiliated company Chokwang Jotun has surpassed that of Chokwang Paint. Chokwang Jotun recorded operating profits of 41.3 billion won in 2024. Essentially, the equity method profits are higher than the profits earned from its core business.
◇Despite diversifying into CK EM Solutions, the company continues to incur a deficit
CEO Yang established the subsidiary CK EM Solutions in 2021 and began to diversify into the electric and electronic component business. CK EM Solutions borrowed 20 billion won from Chokwang Paint in December of last year and raised 5 billion won from LB Private Equity, a private equity fund manager, in May of this year, accelerating its business.
However, the business environment is harsh. As the construction industry slows down and the existing paint business declines, major paint companies are also accelerating their expansion into the electric and electronic sector. Samhwa Paint has developed advanced materials used in manufacturing processes for secondary batteries since last year, and Noroo Paint & Coatings has been conducting research and development related to electronic materials since 2011, successfully achieving mass production and sales.
CK EM Solutions is currently participating in projects of the three major domestic battery companies and conducting sample tests. However, the industry expects it will take time for sales to materialize after mass production, as component testing for electric vehicles takes 5 to 10 years.
CK EM Solutions is still in a deficit state. In 2023, it recorded sales of only 427 million won and a net loss of 1.7 billion won. For 2024, it also reported sales of 500 million won and a net loss of 1.6 billion won.